Britons’ household savings jump by 500% in the past 40 years

21st August 2014

Despite the UK’s personal debt tally hitting £1.4 trillion the value of household savings in Britain has surged by more than 500% over the past four decades.

According to research from Lloyds, the amount Britons have in deposits, savings and pensions has grown more than six fold – by 539% – in real terms during the period, equivalent to an average annual rate of growth of 5%. As a result UK household savings now stand at an estimated £3.5bn, compared to £555bn in 1974, in today’s prices.

In monetary terms the average value of savings per household has risen from £27,869 to £126,278 today. However the increase is not as dramatic as the overall rise in the value of household savings because of the growing number of households since 1974. In this time real household incomes have risen by 140%.

There are however considerable differences in the value of savings with some UK households holding little or no savings. A third, at 32%, of UK households have no savings and a further 14% hold savings of less than £1,500.

Deposit savings

The value of deposit based savings has grown by 352% in real terms since 1974; increasing from £297bn to an estimated £1.3bn today. The largest growth in deposit savings came in the 10 years to 1984 with a rise of 76%; in the decade to 2014 the value of deposits has grown by a relatively modest 17% – for half of this period interest rates have been low.

In 1974, deposit savings accounted for 53% of households’ total savings; in 2014 this proportion is 38%. This equates to an average level of household deposits at £47,736 in 2014, up from £14,907 in 1974.

Saving ratio has fallen significantly

The proportion of income saved by households averaged close to 10% in the 10 years to 1984 against a backdrop of rising interest rates, which reached double digits for the first time in 1979. The household saving ratio peaked at 12.3% in 1980 – the highest level over the last 40 years.

The saving ratio declined rapidly during the ‘noughties’ decade, fuelled by rising levels of consumer spending and borrowing. Lower interest rates and greater economic stability before mid 2007 also reduced the perceived need for households to hold precautionary savings. The saving ratio fell to an annual average low of 2.2% in 2008. Since then the ratio has rebounded strongly to average of 6.4% since 2009.

Andy Bickers, savings director at Lloyds Bank, said: “The UK savings market has undergone dramatic change over the last 40 years. There have been substantial rises in the total amount of savings by households as the country has become richer and the population older. However, the proportion of income saved by households has halved, with less being held in cash savings than in the past. Getting into the savings habit early will help the younger generations to have a more secure financial future.”